SNC-Lavalin received billions in support from federal export agency

Export Development Canada’s head office in Ottawa is shown on Feb. 14, 2019.

Justin Tang/The Globe and Mail

SNC-Lavalin has been one of the leading recipients of support from the federal government’s export agency, obtaining at least $2-billion in loans over the past two decades, and possibly billions more, according to data obtained by The Globe and Mail.

Much of the support – at least $800-million in loans and as much as $1.7-billion – was provided to SNC-Lavalin after news broke of an RCMP investigation into alleged corruption at the company in 2011. Since then, the engineering company has faced corruption allegations in Canada, two Asian countries and three African countries. Federal prosecutors charged SNC-Lavalin in 2015 with bribery and corruption in connection with its dealings in Libya.

A Globe and Mail analysis shows that SNC-Lavalin, which is at the heart of the recent controversy in Ottawa around former justice minister Jody Wilson-Raybould, has received billions of dollars in federal support in 19 separate loans from Export Development Canada. SNC-Lavalin joins companies such as Enbridge and Brookfield as the top recipients of financial aid from the federal export agency over the past 18 years.

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The analysis sheds further light on the ties between the federal government and the Montreal-based engineering and construction giant, which employs tens of thousands of people across Canada. A criminal conviction would jeopardize the company’s EDC support and prevent it from receiving federal procurement contracts for up to 10 years.

Citing “commercial confidentiality,” EDC refuses to disclose the exact amount of each of its transactions. It gives only a range, from minimum to maximum, for each deal. Its disclosures reveal that EDC has provided $2-billion to $4.3-billion in loans to SNC-Lavalin or its customers since 2002. It also provided a loan guarantee of as much as $500-million to SNC, and it underwrote political risk insurance policies for the company in Venezuela and Angola.

EDC is self-financing, but as a federal agency, it has the same credit rating as the Canadian government.

EDC’s Support to SNC-Lavalin

Since EDC began disclosing transactions in 2001, the federal export agency provided 19 loans that benefited SNC-Lavalin totalling $2-billion to $4.3-billion, along with two political risk insurance policies and one loan guarantee. These transactions spanned the globe.

EDC suspended support to SNC-Lavalin between 2014 and 2017 due to multiple corruption allegations against the company.

MATT McCLEARN AND JOHN SOPINSKI/

THE GLOBE AND MAIL, SOURCE: edc

EDC’s Support to SNC-Lavalin

Since EDC began disclosing transactions in 2001, the federal export agency provided 19 loans that benefited SNC-Lavalin totalling $2-billion to $4.3-billion, along with two political risk insurance policies and one loan guarantee. These transactions spanned the globe.

EDC suspended support to SNC-Lavalin between 2014 and 2017 due to multiple corruption allegations against the company.

MATT McCLEARN AND JOHN SOPINSKI/

THE GLOBE AND MAIL, SOURCE: edc

EDC’s Support to SNC-Lavalin

Since EDC began disclosing transactions in 2001, the federal export agency provided 19 loans that benefited SNC-Lavalin totalling $2-billion to $4.3-billion, along with two political risk insurance policies and one loan guarantee. These transactions spanned the globe.

EDC suspended support to SNC-Lavalin between 2014 and 2017 due to multiple corruption allegations against the company.

MATT McCLEARN AND JOHN SOPINSKI/THE GLOBE AND MAIL, SOURCE: edc

The Globe reported last week that Ms. Wilson-Raybould came under pressure from the Prime Minister’s Office and other government officials to tell prosecutors to reach an out-of-court settlement with SNC-Lavalin. She declined to do so, sources said, and was later demoted to Veteran’s Affairs. She resigned from cabinet on Tuesday.

The World Bank announced in 2013 that it was debarring SNC from any of its contracts for 10 years because the company had conspired to pay bribes while bidding for projects in Bangladesh and Cambodia. It was the longest debarment period ever agreed to in a World Bank settlement.

EDC says it suspended its support to SNC-Lavalin between 2014 and 2017 as a result of the corruption allegations against the company – but resumed large-scale financing for the company over the past two years after concluding it had improved its ethics.

The federal export agency “made the decision to pause on new support to the company” after the World Bank debarred SNC-Lavalin for a decade, EDC spokeswoman Jessica Draker told The Globe this week.

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“The time period followed the World Bank’s decision and coincided with other allegations of corruption,” she said.

In addition to the allegations in Libya and the two Asian countries, SNC was also involved in one of Canada’s biggest corruption cases. Its former chief executive officer Pierre Duhaime pleaded guilty this month to breach of trust after he admitted that SNC executives had paid $22.5-million to two top managers of the McGill University Hospital Centre in exchange for information that helped the company win a $1.3-billion contract to build the new hospital.

In 2015, SNC-Lavalin agreed to pay $1.5-million to settle a case filed by the African Development Bank Group. The bank said the settlement resolved allegations, which SNC did not contest, that former employees of SNC-Lavalin International Inc. had ordered illicit payments to public officials to win road contracts in Mozambique and Uganda in 2008 and 2010.

Ms. Draker told The Globe that the EDC had required SNC-Lavalin to make progress to “resolve issues of the past and improve its ethics and compliance program” after a number of investigations had been launched into corruption allegations involving the company.

“There has been a significant shift in culture regarding compliance and ethics at all levels of the organization,” Ms. Draker said. “Upon seeing SNC-Lavalin’s steps to improve its ethics and compliance program and changes it made to its management and governance levels, EDC has facilitated three financing transactions involving SNC-Lavalin since 2017.”

The support from EDC, which included 19 loans, two political risk-insurance policies and one loan guarantee, has helped SNC-Lavalin to win business deals around the world over the past two decades, from Latin America and Africa to Europe and Asia, The Globe’s analysis shows.

In two of the 22 transactions, SNC was listed as one of two Canadian companies sharing the support. In all of the others, it is listed as the sole Canadian beneficiary. Six of the EDC transactions with SNC were listed as being in the range of $250-million to $500-million.

The EDC loans and insurance services were aimed at supporting a wide range of SNC’s international business deals: engineering and construction services, foreign investment projects, water projects, a thermal power plant, and – in one case – general corporate purposes.

After the World Bank debarred SNC for a decade, EDC continued to provide some support to the company, including two transactions with SNC that were disclosed in May, 2013, and April, 2014.

After the 2014 transaction, it disclosed no further dealings with SNC until May, 2017, when the agency announced the first of three more loans to SNC, collectively worth $600-million to $1.25-billion. The company’s revenue in fiscal 2017 was $9.3-billion.

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The federal export agency is less stringent about corruption offences than some other institutions. For example, the federal government’s Integrity Regime, which determines whether a supplier can do business with Ottawa, automatically suspends would-be suppliers for 10 years in a variety of circumstances, including convictions of the company on bribery-related offences. The World Bank has a unit that investigates allegations of fraud and corruption on contracts it has financed, a process that resulted in 78 debarments last year.

In contrast, EDC’s debarment policy is triggered only after a corporate client has been convicted of bribery – an extraordinarily rare occurrence. Even then, debarment lasts only “until EDC is satisfied that such party has taken appropriate measures to deter further bribery.” EDC is not known to have ever debarred a company.

SNC’s media relations department did not respond to questions about the exact financial assistance it has received from EDC, the status of its dealings with EDC after the World Bank debarment, and the measures that were put in place to satisfy the federal agency’s requirements.

The high level of EDC support to SNC-Lavalin over the years is fuelling calls for a reform of the agency’s mandate and changes to the way that the federal government deals with companies that are under an ethical cloud.

Above Ground, a human-rights and environmental advocacy group, has been waging a campaign to prevent the EDC from working with companies that face corruption charges.

“We don’t believe that companies that are investigated for corrupt practices, and particularly companies that are debarred or being criminally prosecuted, should qualify for EDC support,” said the group’s director, Karyn Keenan.

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“This case, and other cases like it, point out that [EDC] is assuming too great a risk around corruption.”

Ms. Keenan is urging the government to reinforce the Export Development Act and tighten the agency’s mandate as part of a continuing legislative review.

“The statute doesn’t mention corruption, it’s completely silent, and so EDC has absolute discretion in determining its policies and procedures around assessing corruption risk and making determinations about whether a company should qualify based on that determination,” she said. “EDC’s due diligence is not sufficiently robust around corruption concerns.”

NDP MP Charlie Angus said the EDC support raises questions about the government’s relationship with the company over the years.

“How is it that the government would continue to do business with them and promote them without any sense that they were going to hold them to some kind of corporate accountability mechanism. It was business as usual,” he said.

Mr. Angus said Canada should modernize its practices and become a model around the world for its handling of companies that are accused of corrupt practices.

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“Given SNC’s track record, I am appalled the government would continue to give them favoured customer status for government support,” he said.

A regular review of EDC’s operations is expected to be completed and made public by the spring of this year, a spokeswoman for Trade Minister Jim Carr said.

Transactions list

Country of transaction

Principal counterparty

EDC product

Transaction description

Canadian company

Minimum possible value (Cdn)

Maximum possible value (Cdn)

Algeria

Shariket Kahraba Skikda

Guarantee

Combined cycle thermal power plant

SNC-Lavalin International

$100,000,000

$500,000,000

Angola

Société Générale (Canada)

Political Risk Insurance

Sale of engineering and procurement services

SNC-Lavalin Group Inc. (Matala Dam Rehabilitation Project)

$250,000,000

$500,000,000

Canada

SNC-Lavalin Group

Financing

Support for Canadian direct investment abroad

SNC-Lavalin Group

$250,000,000

$500,000,000

Canada

SNC-Lavalin Group

Financing

Support for working capital/general corporate purposes

SNC-Lavalin Group

$100,000,000

$250,000,000

Chile

Minera Antucoya

Financing

Sale of engineering and procurement services

SNC-Lavalin Group (Antucoya Copper Project)

$50,000,000

$100,000,000

Dominican Republic

The Government of the Dominican Republic

Financing

Engineering, procurement and construction of a water project

SNC-Lavalin International Inc.

$50,000,000

$100,000,000

Dominican Republic

The Government of the Dominican Republic

Financing

Barahona water supply project

SNC-Lavalin International

$50,000,000

$100,000,000

Madagascar

Dynatec Madagascar, Ambatovy Minerals

Financing*

Support of foreign direct investment

Sherritt International Corporation, SNC-Lavalin

$250,000,000

$500,000,000

Mexico

Minera Y Metalurgica Del Boleo

Financing

Sale of construction services

SNC-Lavalin Group (El Boleo Project)

$100,000,000

$250,000,000

Nicaragua

Polaris Energy Nicaragua

Financing

Sale of various Canadian goods and services

SNC-Lavalin Group

$15,000,000

$25,000,000

Oman

Salalah Methanol Company

Financing

Support for future procurement of various Canadian goods and/or services

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